At times it's better to rent than buy

Many potential home buyers here face a future of long-term renting as prices rise beyond the means of middle-wage households.

"If things keep going the way they are, we will have more of a rental culture," said Bob Pinnegar of the San Diego County Apartment Association.

"It has been the reality in other parts of the country, like San Francisco and New York," he said. "It is something we are watching. The increase in prices definitely has made it harder for people to make the leap and buy that first home. Multifamily housing is the wave of the future."

Even with creative home loans that offer low introductory payments, the goal of purchasing a detached, single-family home is increasingly difficult to achieve for many first-time buyers.

According to the California Association of Realtors, only about one in 10 households here can afford to buy a median-priced, single-family resale home with a 30-year, fixed-rate loan. While lenders have kept the real estate market strong with adjustable interest rates that temporarily reduce mortgage payments, the gap between wages and home prices has widened.

Some say the continuing strong demand for homes has more to do with the low supply of for-sale housing than consumer buying power.

"There are cycles in real estate," he said. "There are times when it actually is better to rent. It's more cost-effective to rent and accumulate a down payment or wait for the market to come back into equilibrium. The dream of homeownership is part of our American culture, but timing has to be taken into consideration."

Not everyone sees a shift toward renting, however. The San Diego Association of Governments reports that in 2003, the county had 575,312 owner-occupied housing units, compared to 440,479 units occupied by renters. That's a gain in homeownership over 1990, when there were 477,579 owner-occupied units and 409,824 units housed tenants.

Part of the increase is due to the conversion of thousands of apartment units to for-sale condominiums. Last year there were 2,338 such conversions, said Russ Valone of MarketPointe Realty Advisors. Through the third quarter of this year there were 2,501.

Condo conversions increase the supply of affordable homes, but deplete rental housing stock and create pressure for rental rates to rise, said Steve Doyle of Brookfield Homes, newly elected president of the California Building Industry Association.

After years of watching home prices rise, many area residents have become resigned to renting, said Steven R. Kellman of the Tenants Legal Center of San Diego.

"As house prices escalate, more people are shut out of homeownership," he said. "People are slowly realizing that the dream is out of their reach."